A Reservation Deposit is Not a Security Deposit

on 16 September 2016

So you are a landlord or property manager. You approve a rental applicant and have the applicant sign the lease, with a move in date scheduled 14 days later.  

What if the tenant does not appear on the day of move-in?  You already took the property off the market, and now you have no tenant. How can you protect yourself?

A common practice is to collect a reservation deposit. Do not confuse this with a security deposit or advance rent. In Georgia, a landlord cannot accept those types of funds until after conducting a move-in inventory and giving the tenant occupancy.  But the parties can enter into a separate agreement (or there can be language in the lease to this effect), for the prospect to give a payment as a demonstration of good intent. Such money would be nonrefundable, but usually it can be credited to the first month’s rent upon successful move-in.  Under such an arrangement, the landlord has something to cover the damages of a no-show.

It may seem like semantics, as to what you label this payment, but it may make a big difference, if the landlord is forced to go before a judge to defend keeping the money. The law in Georgia is very clear—no inventory, no security deposit.

Daniel R. Wilhelm
3 Options Realty, LLC.

The author of this Blog is not an attorney. Nothing written should be construed as legal advice. Conclusions conveyed are outcomes based upon practical experience and should not be depended upon to be a common outcome of other similar circumstances.